Mobile Workforce Guidelines for Contractors
Mobility is a defining aspect of the construction industry, and the costs of mobility while managing multiple projects are unique in how they are recorded, reimbursed and regulated. Our whitepaper provides guidance for contractors to analyze and choose the right method for their organization in navigating a mobile workforce as well as maintaining compliance most effectively.
Key Highlights – How Construction Contractors Can Maintain Tax Compliance
- Tax law has changed in many ways within the past several years. Among the most significant changes impacting contractors include the following:
- Restaurant meals are 100 percent deductible for tax years 2021 and 2022 per the Consolidated Appropriations Act. Internal Revenue Service (IRS) Notice 2021-25 also clarified that these meals do not have to be consumed on the restaurant premises. However, this rule excludes businesses that primarily sell pre-packaged food and beverages, such as grocery stores.
- Due to inflation, the IRS increased the standard mileage rate to $0.625 cents per mile for July 1, 2022, to Dec. 31, 2022.
- The Tax Cuts and Jobs Act (TCJA) allowed for 100 percent bonus depreciation on new and used fixed assets through 2022. However, bonus depreciation begins to phase out in 2023 to 80 percent, with a continual stepdown through 2025.
- Contractors should consider the need for an accountable plan or a non-accountable plan to manage employee reimbursement when their workforce incurs out-of-pocket business expenses due to their work in multiple locations.
- An accountable plan must meet certain criteria and requires clear documentation; if the arrangement of the accountable plan meets all criteria, a contractor may deduct these reimbursements as a business expense. The deductions are then subject to the 50 percent limitation rules for any meal expenses, and the reimbursements do not impact payroll taxes since they are not included in employee income. Of the two plans, accountable plans are considered the most advantageous for both contractor and employee. The most common methods of an accountable plan are direct reimbursement, per diems and company provided assets. We provide details for each of these methods within the whitepaper.
- A non-accountable plan is any reimbursement plan that does not meet all the criteria, and usually manifests in the form of an expense allowance per month for expenses. These payments are 100 percent deductible by the contractor as additional compensation to the employee.
- To reimburse travel expenses, contractors must first determine if their employees’ workplaces fall into one of three categories outlined by the IRS – regular workplace, temporary workplace or multiple workplaces. Our whitepaper provides a detailed breakdown of each category with examples and impacts to reimbursement of local transportation, overnight travel and commuting.
- Housing or lodging provided by the contractor to employees, as well as other fringe benefits (e.g., cell phone, laptop, etc.), may be deductible as a business expense and excluded from the employees’ income granted that the following criteria are met:
- Lodging is on the contractor’s business premises.
- Lodging is provided for the convenience of the contractor rather than the employee.
- Lodging is a requirement for the condition of employment.
To learn more, download the article, or reach out to Mary Beth Saylor.
